GSE Duty to Serve Plans Include Proposals to Work with HFAs; Potential Housing Credit Investments

The Federal Housing Finance Agency (FHFA) earlier today released Fannie Mae and Freddie Mac’s proposed Underserved Market Plans (the Plans). The purpose of these plans is for each firm to explain how it intends to carry out its duties as outlined by FHFA’s Enterprise Duty to Serve rule.

As NCSHA previously reported, the Duty to Serve rule requires Fannie Mae and Freddie Mac to support lending for housing for very low-, low-, and moderate-income families (those earning 100 percent of area median income or below) in three underserved segments of the housing finance market: manufactured housing, affordable housing preservation, and rural areas. For each underserved market segment, the Rule outlines a number of activities that the GSEs may support to fulfill their Duty to Serve Obligations.

The Underserved Market Plans outline which of the activities described under the Duty to Serve Rule Fannie Mae and Freddie Mac intend to pursue over the next three years (2018-2020) to support housing in the specified markets. Both Plans can be viewed on a special website FHFA has established that focuses on the Duty to Serve rule.

The Plans will be open for public comment until July 10. NCSHA intends to comment on each plan. If you have any input you would like NCSHA to consider when drafting its comments, please send it to Greg Zagorski by Friday, June 30.

NCSHA will compose a more detailed description of the Plans in the coming weeks. Below is a summary of provisions in each plan that directly involve HFAs.

Potential GSE-HFA Collaborations

Both Fannie Mae and Freddie Mac indicate in their proposed plans that they intend to work directly with HFAs to help support various affordable housing activities. Fannie Mae proposes to engage state HFAs to research and identify opportunities to better support shared-equity homeownership loans, affordable multifamily and single-family housing in "high-needs rural regions" (including Middle Appalachia, the Lower Mississippi Delta, and colonias), and financing for energy and water efficiency improvements in affordable single-family and multifamily housing. Fannie Mae also hopes to partner with HFAs to support the financing of rural housing by small financial institutions, potentially by having HFAs aggregate such loans before they are sold to Fannie Mae.

Freddie Mac intends for HFAs to be play a large part in its efforts to increase support for manufactured housing lending. Specifically, Freddie Mac’s plan proposes that by 2019 it will have amended its underwriting standards for manufactured housing loans so that is can guarantee manufactured housing loans originated through all HFAs that are Freddie Mac approved Seller/Servicers. Freddie Mac also hopes to work with HFAs and other industry partners to expand homebuyer counseling and education to more prospective manufactured housing borrowers. The plan also mentions that HFAs’ involvement with Freddie Mac’s Manufactured Housing Industry Taskforce (MHIT).

Like Fannie Mae, Freddie Mac also proposes to collaborate with HFAs to support shared-equity homeownership loans and housing opportunities in high-needs rural regions.

Housing Credit Investments

The Duty to Serve Rule allows Fannie Mae and Freddie Mac to receive Duty to Serve credit for Housing Credit equity investments in rural area, should FHFA decide to allow the firms to resume such investments. The Rule defines "rural areas" as those census tracts outside of a Metropolitan Statistical Area (MSA) as designated by the Office of Management and Budget, or census tracts in an MSA, but outside of the MSA’s Urbanized Areas and Urban Clusters, that have a housing density of 64 housing units per square mile or less.

Both Fannie Mae and Freddie Mac Fannie Mae include Housing Credit investment sin their Underserved Market Plans. Fannie Mae intends to research the Housing Credit market in 2018 and, contingent on FHFA approval, acquire at least five Housing Credit investments on projects in rural areas in 2019 and at least ten such investments in 2020. Fannie Mae’s plan mentions that it cannot estimate the market impact of these investments because it has not been able to make any Housing Credit investments in the last three years. Fannie Mae also intends to develop and implement plans for making Housing Credit investments that support housing in high-needs rural areas and housing for high-needs rural populations, such as Native Americans and seasonal migrant workers.

Freddie Mac’s plan focuses on Housing Credit investments for housing in high-need rural areas and for high-needs rural populations. Specifically, Freddie Mac plans to research the market for such investments in 2018 and, contingent on FHFA approval, start to make such investments in 2019 and 2020. Freddie Mac also plans by 2020 to begin purchasing loans for small multifamily properties (between five and 50 units) originated through the U.S. Department of Agriculture’s 515 Program that have been allocated four percent Housing Credits.